Manufacturing And Supply Agreement

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [****]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. --------------------------------------------------------------------------------


PRIVATE LABEL MANUFACTURING AND SUPPLY AGREEMENT


THIS PRIVATE LABEL MANUFACTURING AND SUPPLY AGREEMENT (this "Agreement") is made as of this 13th day of November, 2003 (the "Effective Date"), by and between Diatron Messtechnik GmbH., a corporation organized under the laws of Austria and having its principal place of business at Ameisgasse 49-51/2A, 1140 Vienna ("Supplier"), and Abaxis, Inc., a California corporation having its principal place of business at 3240 Whipple Road, Union City, California 94587, USA ("Purchaser").


BACKGROUND


Supplier is a supplier of hematology analyzers for use in the human and veterinary blood analysis market and Purchaser wishes to purchase Supplier's products for use in the veterinary market. Supplier agrees to sell to Purchaser, and Purchaser agrees to purchase, the products described below, subject to the terms and conditions contained in this Agreement, for distribution by Purchaser under its own trademarks and tradenames.


AGREEMENT


Supplier and Purchaser agree as follows:


1. Purchase and Sale Obligations.


1.1 General. Supplier hereby appoints Purchaser as Supplier's reseller of the products specified on Schedule A (Products) attached to this Agreement and incorporated herein by this reference (the "Products"). Subject to the terms and conditions of this Agreement, Purchaser agrees to purchase, and Supplier agrees to sell the Products. With respect to the HMII Hematology Analyzer described on Schedule A (Products) as of the Effective Date, Supplier appoints Purchase as Supplier's exclusive worldwide distributor. The parties may modify the Products subject to this Agreement from time to time by annexing a revised Schedule A (Products) to this Agreement. Supplier agrees that Supplier will not (and will not permit any third party to) distribute any other products of Supplier which are hematology products, in the veterinary market in the United States, Canada, Australia, New Zealand, Japan and/or in such other geographic territories as the parties may mutually agree in writing.


1.2 Minimum Purchase Commitment and Exclusivity. Purchaser agrees to order from Supplier for delivery during each Contract Year during the term of this Agreement, the minimum number of Products, per Contract Year, as is specified on Schedule B attached hereto and incorporated herein (the "Minimum Purchase Commitment"). Contract Year shall mean each twelve (12)-month period commencing with the date Products are first available for


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shipment to Purchaser. Supplier agrees, subject to Purchaser's strict compliance with the terms and conditions of this Agreement including, without limitation, Purchaser's compliance with the Minimum Purchase Commitment, that it will not, directly or indirectly, knowingly sell products with the same form, fit and function of the Products into the veterinary market in competition with the Products. The failure to meet the Minimum Purchase Commitment shall not constitute an Event of Default as defined in Section 14.2 (Termination Upon Event of Default) of this Agreement unless and/or until the amount Purchaser orders for delivery during any Contract Year falls below seventy-five percent (75%) of the then applicable Minimum Purchase Commitment. Supplier agrees to disclose to Purchaser any inquiries, sales leads or information it receives from potential purchasers of Products in territories set forth in Section 1.1 (General).


1.3 Governmental Rules and Regulations. Supplier's obligation to ship orders to Purchaser under this Agreement shall be subject to Supplier's right and ability to make such sales and obtain required licenses and permits, under all applicable decrees, statutes, rules and regulations of a government and/or agency with competent jurisdiction presently in effect or which may be in effect hereafter.


2. Orders, Payment and Delivery.


2.1 Orders. Purchaser shall order Products from Supplier under this Agreement by submitting to Supplier a written purchase order specifying the Products, quantities and requested delivery dates required to enable Supplier to fill the order. Each purchase order submitted to Supplier is subject to acceptance by Supplier at its offices to which such order was submitted. Supplier shall have no liability to Purchaser with respect to orders which are not accepted by Supplier; provided, however, that Supplier will not unreasonably reject any orders for Products which do not require any modifications or additions, other than the modifications of Supplier's products specified in Section 3.1 (Customization for the Veterinary Market) hereto. Subject to the foregoing, Supplier may reject, in its sole discretion, any order for customized Products. In the event Supplier has not given Purchaser notice of acceptance or rejection of a purchase order within ten (10) business days of receipt thereof, such order shall be deemed accepted. The purpose of the purchase order to be issued under this Agreement is for specifying the Products, quantities and requested delivery dates only; no terms and conditions of Purchaser's purchase orders, Supplier's order acknowledgment or any other document or instrument of Purchaser or Supplier shall be binding upon the other party or amend or modify this Agreement in any manner.


2.2 Prices. The purchase price for Products sold under this Agreement shall be determined in accordance with Schedule A (Products) hereto from the date hereof until the end of the first Contract Year. After the first Contract Year, Supplier may modify the prices for Products, upon notice to the Purchaser; provided such prices do not increase more than five percent (5%) in any one Contract Year, unless justified by cost increases incurred by Supplier from third-party suppliers. Supplier agrees to provide Purchaser with ninety (90) days prior written notice of any price change and Supplier agrees to honor the price in effect prior to any notice with respect to orders (i) placed prior to the price change effective date and (ii) not modified or canceled by Purchaser. All sales are F.O.B. Vienna or Budapest (Incoterms 2000). Purchaser agrees to separately pay all expenses incurred by Supplier in the shipment and delivery


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of ordered Products, including without limitation freight charges, import duties and insurance premiums. Purchaser shall determine, in its sole discretion, the price at which Purchaser resells Products to Purchaser's customers.


2.3 Shipment and Delivery. Shipments will be made to the warehouse facilities of Purchaser in Union City, California, USA or Darmstadt, Germany, as designated by Purchaser in advance of each shipment. Shipments will be made by air to Union City and by truck to Darmstadt. In the event Purchaser requests express delivery or shipment by air instead of by truck or by courier service, Purchaser agrees to pay all additional expenses required by such request. Supplier will use commercially reasonable efforts to meet Purchaser's requested delivery schedules for Products. For Supplier's first purchase order, the latest shipment date shall be 90 days after receipt of purchase order. In any other event, Supplier agrees to ship the ordered quantity of Products within thirty (30) days after receipt of the applicable purchase order, unless the quantity of Products ordered in such purchase order exceeds the number of products forecasted (pursuant to Section 2.6 (Forecasts)) by twenty-five percent (25%) or greater, in which case, Supplier agrees to ship those Products ordered in excess of the forecast within ninety (90) days after receipt of such purchase order. Should orders for Products exceed Supplier's available inventory, Supplier will allocate its available inventory and make deliveries on such basis as Supplier deems equitable, as agreed to by both parties. Unless otherwise specified in Purchaser's purchase order, Supplier shall be authorized to make deliveries in installments. Purchaser shall make any claims for shortage or damage of Products with the common carrier promptly upon receipt of the order and provide Supplier with written notice of such a claim. Except in the case of negligence on the part of Supplier or Supplier's failure to package Products as set forth below, Supplier will not have responsibility for Products damaged in shipment and Purchaser must handle all claims for damage with the carrier. As between Supplier and Purchaser, Products shall be deemed accepted by Purchaser unless, within ninety (90) days of delivery of the Products, Purchaser affirmatively rejects the Products, by written notice detailing the reasons for rejections. The parties acknowledge that they may mutually agree in writing in the future that the foregoing period of time be reduced. Such reasons for rejection may be non-conformance of the Products to the technical specifications described on Schedule A (Products), damage in connection with bodily injury and property damage arising out of any defect in the Products made intentionally, unintentionally or negligently by Supplier during manufacturing and packaging, and the breach of any material provision of this agreement by Supplier. If no such notice of rejection is received, Purchaser shall be deemed to have accepted delivery provided, however, the acceptance of delivery shall in no way diminish or affect the product warranty given by Supplier in Section 6 (Warranty and Repairs). If Purchaser rejects a shipment, Purchaser shall promptly return a sample of the defective Product to Supplier in accordance with Supplier's instructions, to enable Supplier to, within thirty (30) days, inspect and determine whether the Product is defective; provided that Purchaser shall retain the rest of the Products pending such determination. It is Purchaser's responsibility to properly store and handle all Products pending inspection and/or return. If rejection was timely effected and Supplier determines the Products to be defective, Supplier agrees to repair or replace the Products or cancel an unpaid invoice or refund the amounts paid with respect to such defective Product which is returned to Supplier, at Supplier's option.


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All shipments shall be accompanied by a quality control release report (the form and contents of which shall be mutually agreed upon by the parties) for each unit of Product shipped by Supplier. Unless Purchaser requests otherwise, all Products ordered by Purchaser shall be packed for shipment and storage in accordance with Schedule A (Products). It is Purchaser's obligation to notify Supplier of any special packaging requirements (which shall be at Purchaser's expense).


2.4 Payment. Purchaser agrees to pay amounts invoiced by Supplier for Products without offset or deduction for any reason whatsoever except as otherwise provided in Section 2.3 (Shipment and Delivery), within thirty (30) days from the date of invoice payable in Euro. If Purchaser fails to pay any amount when due, Purchaser agrees to pay all costs and expenses, including without limitation reasonable attorney's fees, incurred by Supplier in collecting such overdue amounts, together with interest on such unpaid amount at the lesser of one and one-half percent (1-1/2%) per month or the greatest amount permitted by applicable law. Supplier reserves the right at any time after Purchaser fails to make any payment within sixty (60) days after the due date, to require payment for all Products delivered hereunder to be made by irrevocable letter of credit. If Supplier elects to have payment made by letter of credit, Purchaser shall select the issuing bank, which must be acceptable to Supplier. Any such letter of credit shall be governed by Uniform Customs and Practice for Documentary Credits (UPC) 500.


2.5 Title and Risk of Loss. Title to and risk of loss of the Products shall pass to Purchaser upon the earlier of delivery of the Products to Purchaser or to a carrier at Supplier's point of shipment.


2.6 Forecasts. Purchaser shall submit a rolling twelve (12)-month sales forecast to Supplier every three (3) months on the first day of each calendar quarter first following the Effective Date of this Agreement (or, if the Effective Date of this Agreement is within thirty (30) days before any of such dates, commencing on the second such date after the Effective Date of this Agreement). Such sales forecast shall include expected sales quantities per month, order dates, shipping dates and Product requirements. If the most recent forecast becomes materially inaccurate at any time, Purchaser shall promptly provide Supplier with updated information. The forecast information for months four (4) through twelve (12) of the sales forecast shall be for planning purposes only and Purchaser is not required to purchase the Products projected to be sold on the sales forecast. The Purchaser shall issue a purchase order and purchase the Products included in the first three (3) months of each forecast, in accordance with the provisions of Section 2.1 (Orders).


3. Substitutions and Modifications; Discontinued Products; Quality Assurance.


3.1 Customization for the Veterinary Market. Supplier agrees to modify Supplier's product in accordance with the technical specifications set forth on Schedule A (Products). It is anticipated that this work will include modifications to the embedded software and/or the keypad and/or the interface. Supplier and Purchaser shall collaborate to ensure the proper interface, connection and interoperability between the software of Supplier's product and that of the VetScan, a product of Purchaser. Technical specifications of the interfaces of Supplier's products and their modifications according to Purchaser's requirements for the


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Products are set forth on Schedule D (Interface). Purchaser agrees to assist Supplier in the translations, revisions and editing work to provide an operating manual in English for the Products.


3.2 Reagents for Products. Purchaser shall be responsible for producing or procuring from third parties reagents for use in the Products. Supplier shall assist Purchaser in the procurement of reagents as well as inform Purchaser in writing of any changes in the performance of the Products that affect the specifications of the then-current reagent used on the Products with at least ninety (90) days prior notice.


3.3 Product Changes. Except with respect to Products ordered pursuant to a purchase order which has been accepted by Supplier as described in Section 2.1 (Orders) Supplier shall have the right, at any time and from time to time, to make substitutions and modifications to the Products (including software improvements); provided, however, that Supplier agrees to consider that Purchaser's use of the Products is in the veterinary market in making any such substitutions or modifications. In the event that any proposed substitution or modification affects, in Supplier's reasonable judgment, the form, fit or function of a Product, Supplier shall give Purchaser written notice of such proposed substitution or modification at least thirty (30) days prior to its taking effect and Purchaser shall have the right, during such thirty (30)-day period, to order Products without such substitution or modification for delivery within fifteen (15) days after the expiration of such thirty (30)-day period. Any changes that affect the Product performance, operation or documentation shall be provided to the Purchaser in writing with no less than ninety (90) days notice. Purchaser shall have the right, at any time and from time to time to request substitution and/or modification to the Products. In the event of such request Supplier agrees to review and consider the requested modifications and notify Purchaser whether it is feasible and/or practical to make the modifications requested. In the event Supplier notifies Purchaser the modifications are feasible and practical, it will also notify Purchaser of the estimated modification costs and estimated time for manufacturing the modified Product. All work requested by Purchaser, other than that set forth in Sections 3.1 (Customizations for the Veterinary Market), 6 (Warranty and Repairs) and 8.1 (Clinical Studies), will be charged on a time and materials basis, at an initial rate of fifty Euros ((euro)50) per employee per hour, for a minimum of 3.5 hours for each request (or as may be otherwise mutually agreed upon by the parties).


3.4 Discontinued Products. Supplier agrees to notify Purchaser in writing not less than one (1) year in advance of the discontinuance of any Product. In the event Supplier is unable to manufacture the Products for Purchaser (due to bankruptcy, fire, or other event of force majeure), then Purchaser will have the right to manufacture the Products (or have the Products manufactured for Purchaser), and, in exchange, pay a reasonable royalty or license fee for such right. The parties will establish an escrow account providing for the deposit of updated copies of all information reasonably necessary for the manufacture of the Products with a third party (to be agreed upon by the parties) under terms to be agreed upon in good faith between the parties and such third party. Purchaser agrees to cover the costs for establishing and maintaining of said escrow account. Supplier will deposit in the escrow account all information reasonably necessary for the manufacture of the Products prior to shipment of the first order of Products.


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The conditions for the transfer of know-how related to such manufacture shall be agreed upon separately in good faith by the parties.


3.5 Quality Assurance. The Product shall be manufactured in accordance with ISO 9001 standards. Purchaser shall be permitted to inspect facilities in which the Products are developed and produced upon reasonable advance written notice to Supplier, during business hours at times reasonably convenient to both parties; provided, however, that Purchaser acknowledges that all information obtained in the course of any such inspection shall be deemed proprietary information pursuant to Section 4 (Confidentiality) of this Agreement. Supplier shall be permitted to inspect Purchaser's storage and handling procedures of the Product upon reasonable advance written notice to Purchaser during business hours at times reasonably convenient to both parties; provided, however, that Supplier acknowledges that all information obtained in the course of any such inspection shall be deemed proprietary information pursuant to Section 4 (Confidentiality) of this Agreement.


4. Confidentiality. Supplier and Purchaser agree that certain information supplied by each to the other during the term of this Agreement, including, without limitation, the Products, the documentation and the intellectual property and technology underlying the Products, the information for customization pursuant to Section 3.1 (Customization for the Veterinary Market) and information contained on purchase orders or regarding Purchaser's ordering or delivery patterns is proprietary, secret, confidential or non-public. All such information shall be held in confidence by the receiving party, shall be used only for the purposes of this Agreement and shall not be disclosed to any person other than an employee with a need to know the information in order to fulfill the obligations of the receiving party hereunder. Information shall not be subject to the provisions of this Section 4 (Confidentiality) if shown by recipient's records to be: (i) in the public domain at the time of disclosure or thereafter through no fault of the recipient; (ii) known to the receiving party at the time of disclosure; (iii) disclosed to the receiving party without an obligation of confidentiality by a third party with the legal right to make such free disclosure; (iv) developed independently by the receiving party by personnel without access to or knowledge of the information disclosed; or (v) clinical studies set forth in Section 8.1 (Clinical Studies) and other developments and improvements of products, parts, programs and interfaces which are not specifically proprietary or confidential information of Purchaser or any third party. The receiving party may disclose information to the extent requested or required by a governmental or judicial entity, provided such disclosure is limited to the fullest extent permitted by applicable law.


All documentation with respect to the Products (except information contained in or for use in manuals, promotional materials or educational materials to be provided to Purchaser's customers), are furnished solely for Purchaser's internal use. Purchaser may make copies of such documentation to satisfy its internal requirements, provided that all such copies include appropriate copyright and proprietary information notices. No other copies or use of such documentation, or any portion thereof, shall be made without the prior written approval of Supplier. From time to time, Purchaser shall provide Supplier with feedback, comments or suggestions regarding the Products (collectively, "Feedback"). Feedback, if any, will be the property of the Supplier and may be freely used by Supplier in Supplier's business. Feedback specifically excludes any proprietary or Confidential Information of Purchaser.


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Upon termination of this Agreement, Purchaser shall return or, at Supplier's request, destroy all confidential, proprietary or secret information of Supplier in Purchaser's possession. The obligations of the parties pursuant to this Section 4 (Confidentiality) shall survive the expiration or earlier termination of this Agreement for a period of five (5) years.


5. Product Trademarks and Copyrights.


5.1 Trademark Usage. Purchaser agrees that the Products purchased and/or licensed hereunder shall be sold or leased by Purchaser only under the trademarks, tradenames or logos (collectively the "Purchaser Marks") of Purchaser.


5.2 Notices. Purchaser shall not alter or remove any copyright, trademark, trade secret, proprietary and/or other legal notices of Supplier or third parties contained on or in the Products. The existence of any such copyright notice shall not be construed as an admission, or be deemed to create a presumption, that any publication of such Products has occurred.


5.3 Logos. Supplier shall label all Products with Product serial numbers, Product electrical data, Purchaser Marks and such other label information as may be specified by Purchaser. Purchaser shall provide Supplier with camera-ready artwork necessary for the labeling of the Products, which shall include, without limitation: Purchaser Marks, Product serial numbers, electrical data label information, and such additional information as may be specified by Purchaser. Supplier shall be responsible for the costs of such labeling. Supplier shall be responsible for ensuring that the Products and all labeling conform to applicable rules and regulations with respect to electrical standards established by Underwriter's Laboratories ("UL") for the United States and Canada and by Conformite Europeen ("CE"). Purchaser shall be responsible for the costs of registration. The parties will discuss in good faith the apportionment of costs for ensuring conformity of the Products to rules of other applicable standard setting organizations in the applicable jurisdictions. Purchaser shall be responsible for the costs of registration with such other standard setting organizations in the applicable jurisdictions.


5.4 Trademark License. Purchaser hereby grants to Supplier a non-exclusive, non-transferable right to use the Purchaser Marks solely on the Products ordered by Purchaser hereunder and associated packaging. Supplier agrees to the following:


(a) to comply with Purchaser's guidelines and instructions regarding use of the Purchaser Marks as communicated to Supplier from time to time;


(b) in the event Purchaser notifies Supplier that such use is not in conformance with Purchaser's guidelines and instructions, to promptly bring such use into conformance;


(c) to ensure that all use of the Purchaser Marks will not reflect adversely upon the good name or good will of Purchaser and that all Products in connection with which the Purchaser Marks are used are of high standard and workmanship and of such nature,


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style, appearance and quality as shall be adequate and suited to the protection of the Purchaser Marks and the goodwill associated therewith;


(d) not to use the Purchaser Marks (or any part thereof) as part of, or in combination with, any other names or trademarks without Purchaser's prior written approval;


(e) not to register (or aid any third party in registering) the Purchaser Marks (or confusingly similar mark) or take any action inconsistent with Purchaser's ownership of the Purchaser Marks in any jurisdiction; and


(f) that all usage of the Purchaser Marks will be on behalf of, and inure to the benefit of, Purchaser.


6. Warranty and Repairs.


6.1 Warranty. Supplier warrants that the Products manufactured and sold by it will be free from defects in material and workmanship, and will substantially conform to the technical specifications described in Schedule A (Products), in normal use and service for a period and under the terms set forth in Schedule C (Warranty Terms), annexed hereto and made a part hereof. The warranty set forth in this Section 6.1 (Warranty) shall be void to the extent of (i) any modification of a Product (except for repairs made by Purchaser) by any person or entity other than Supplier, (ii) misuse or abuse of a Product or documentation by Purchaser or Purchaser's customers or end users, (iii) negligence or wrongdoing of Purchaser or Purchaser's customers or end users, (iv) accident, disaster or event of force majeure, (v) use of a Product or documentation in any manner inconsistent with this Agreement, (vi) causes external to a Product such as, but not limited to, power failure or electrical power surges, (vii) improper storage of a Product, (vii) use of a Product in combination with products, equipment or software not supplied by Supplier or by Purchaser or (viii) use of a Product in combination with products, equipment or software supplied by Purchaser without Supplier's technical approval. Purchaser shall pay Supplier for services performed by Supplier not covered by this Section 6.1 (Warranty) at Supplier's then current time and materials rates.


6.2 Repairs. Purchaser shall be responsible for proper installation, service, maintenance and repair of the Products as well as for coordinating repair requests from Purchaser's customers or end users and for resolution of such repair requests. If Purchaser cannot resolve a repair request through Purchaser's technical support personnel or by providing spare parts, Purchaser shall first coordinate with Supplier's technical support personnel for resolution of such repair request. In exceptional cases and after thorough troubleshooting Purchaser shall ask for written authorization to return Products to Supplier for repair. It is Supplier's option to choose the carrier when Supplier is responsible for transportation costs. Except for rejected Products set forth in Section 2.3 (Shipment and Delivery) and for Products covered by the warranty in Section 6.1 (Warranty) which are returned within the one (1)-year warranty period, Purchaser shall be responsible for (a) paying the cost of mailing the Products to repair facilities designated by Supplier, (b) paying Supplier for its labor costs at Supplier's then current time rates and (c) providing replacement Products on a loan basis to Purchaser's customers or end users. Supplier shall return repaired Products to Purchaser within thirty (30)


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days of receipt of such Products and pay the cost or return mailing for Products received prior to the end of the one (1)-year warranty period; ot ...